Speech

Opening Remarks by Rahul Anand, IMF Mission Chief for Bangladesh at the Press Briefing on Bangladesh

December 14, 2023

The IMF Executive Board completed the first review of the IMF-supported program and the Article IV consultations on December 12. As you saw in our press release , the Board’s approval unlocked disbursements of about US$468.3 million of the second tranche of the Extended Credit Facility (ECF)/ Extended Fund Facility (EFF), bringing the total disbursements under the ECF/EFF thus far to about US$936.6 million. Additionally, the Board’s approval also unlocked about US$221.5 million, as the first tranche of the Resilience and Sustainability Facility (RSF), a concurrent program to help address the country’s large climate financing needs.

Earlier today, we published the staff report, which provides all necessary details of our assessment. Let me summarize some key issues first, and then I will take your questions.

Bangladesh’s economy has continued to face economic challenges. External headwinds, coupled with initially inadequate domestic policy response, have made macroeconomic management challenging. An unprecedented reversal of the financial account deteriorated the overall balance of payments in FY2023, leading to continued pressures on FX reserves and the Taka.

In response to these shocks, the authorities have taken several measures to deal with macroeconomic challenges. Bangladesh Bank has tightened monetary policy, allowed greater exchange rate flexibility, and unified the multiple exchange rates. The authorities also kept the fiscal primary balance within the program target.

Thanks to these efforts by the authorities, and despite the difficult macroeconomic environment, the overall program performance has been broadly satisfactory. I am happy to report that most program targets and reform commitments were met.

So, what should be the priorities going forward?

In the near-term, the focus should be on containing inflation and rebuilding external resilience. This would require a calibrated monetary policy tightening, which is supported by prudent fiscal policy stance. At the same time, a more flexible exchange rate system will help alleviate foreign exchange pressures and rebuild external buffers.

In addition, we also need to focus on growth–boosting reforms. By that, we mean reforms that target the most binding structural constraints on Bangladesh’s economic activity. Let me outline a few areas:

• First, raising tax revenues and rationalizing non-priority expenditure is key. This will allow the authorities to increase investment in social development and climate spending. Continued efforts to enhance public financial and investment management are also needed to increase spending efficiency and mitigate fiscal risks.
• Second, modernizing the monetary policy framework and improving policy transmission will foster macroeconomic stability. Further reforms to modernize the exchange rate framework and strengthen FX reserve management would enhance external resilience.
• Third, reform priorities should also focus on addressing vulnerabilities in the financial sector by strengthening banking regulation, supervision, and governance. We would also encourage deepening of capital markets to help mobilize private financing to support growth objectives.
• further trade liberalization and enhancements to the investment climate will boost foreign direct investment and help diversify exports. Raising productivity, including through education and skills development, as well as further increasing female labor participation will further boost growth potential.
• And finally, I noted climate spending earlier. Building resilience to climate change and natural disasters is a priority for achieving high, inclusive, and green growth. To do that, improving efficiency in climate spending and mobilizing climate financing will be crucial.

Based on our discussions with authorities and the progress so far, we are encouraged that the authorities remain fully committed to taking necessary steps to restore near-term macroeconomic stability and accelerate economic reforms, while also protecting the vulnerable and delivering on the climate agenda.

At the same time, the authorities are also making good progress on implementing reforms to boost growth. We look forward to the authorities’ accelerated implementation of these reforms, which will help Bangladesh to successfully graduate from the LDC status in 2026 and achieve its aspiration of reaching the upper-middle income status in 2031.

With this, I will open the floor and take any questions that you may have. Thank you.

Closing remarks (post Q&A)

Despite significant challenges and uncertainty, the program has supported the authorities’ efforts to preserve macroeconomic stability and protect the vulnerable, while accelerating economic reforms and delivering on the climate agenda.

Going forward, we need calibrated monetary tightening, supported by neutral fiscal policy stance and greater exchange rate flexibility. This will help restore near-term macroeconomic stability and bolster external resilience.

Restoring macroeconomic stability and accelerating growth-oriented reforms will be key to meet the country’s aspirations to reach upper-middle income status by 2031.